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Electronically Recorded Tarrant County Texas 

Official Public Records 1 0/20/2009 4:06 PM D209278960 

^Be§^Qy-€QNFl9^fI^Hr¥- - RIGri^ it 3 YolP 4 jfifeE A NATURAL 
PERSON, YOU MAY REMOVE OR STRIKE ANY OR: ALL OF THE 
FOLLOWING INFORMATION FROM ANY INSTRUMENT THAT 
TRANSFERS AN INTEREST IN REAL PROPERTY BEFORE IT IS FILED FOR 
RECORD IN THE PUBLIC RECORDS: YOUR SOCIAL SECURITY NUMBER 
OR YOUR DRIVER'S LICENSE NUMBER 

OIL AND GAS LEASE 

(No Surface Use; Paid Up Lease) 

This Oil and Gas Lease (this "Lease") is made on October 

_L 2008, between 

Sylvia D* Flores (hereafter called "Lessor"), whose address is 3304 Brandi Ct, Hurst, 
Texas 76054, and XTO Energy Inc* (hereafter called "Lessee"), whose address 
is 810 Houston Street Fort Worth. TX. 76102 . 

1 . Grant, In consideration of Ten Dollars and other consideration in hand paid, 
Lessor grants and leases exclusively unto Lessee the land described in attached Exhibit A 
(the "Land") in Tarrant County, Texas, for the sole purpose of exploring, drilling, and 
producing oil and gas, and to produce, save and transport oil and gas and other products 
manufactured from oil and gas produced from the Land, but only as to depths below 
1,000 feet beneath the surface of the ground. This lease also covers and includes any 
interest which Lessor may own in any street, alley, highway, railroad, canal, river, body 
of water, contiguous or adjacent to the Land, whether the same be in said survey or 
surveys or in adjacent surveys, although not included within the boundaries of the land 
particularly described above. 

2. Primary Term. This Lease is for a term of three (3) years from this date (called 
"Primary Term") and so long thereafter as oil or gas is produced from the Land, or lands 
pooled therewith, in paying quantities. 

3. Minerals Covered. This Lease covers only oil and gas. The term "oil and gas" 
means oil, gas, and other liquid and gaseous hydrocarbons and their constituent elements 
produced through a well bore. All other substances and minerals are excepted from this 
Lease and reserved to Lessor. 

4. Royalty. 

(a) As royalties, Lessee agrees: 

(1) To pay to Lessor, on oil and other liquid hydrocarbons produced 
and saved from the Land, 25% (the "Royalty Fraction") of the market value at the point 
of sale of such oil, or at Lessor's option, which may be exercised from time to time, the 
Royalty Fraction of all oil and other liquid hydrocarbons produced and saved from the 
Land, which shall be delivered free of expense to Lessor at the wells or to the credit of 
Lessor at the pipeline to which the wells may be connected. 

(2) To pay to Lessor: 

(i) On gas produced from the Land and sold by Lessee or used 
off the Land and to which the following subparagraphs (ii) and (iii) 
do not apply, the Royalty Fraction of the market value at the point 
of sale, use or other disposition, less the deductions authorized in 
subparagraph 4(c) below. 

(ii) On gas produced from the Land that is processed in a 
processing plant in which Lessee or an affiliate of Lessee has a 
direct or indirect interest, the higher of the Royalty Fraction of the 
market value of the gas at the inlet to the processing plant, or the 
Royalty Fraction of the market value of all processed liquids saved 
from the gas at the plant plus the Royalty Fraction of the market 
value of all residue gas at the point of sale, use, or other 



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disposition, less the deductions authorized in subparagraph 4(c) 
below. 

(iii) On gas produced from the Land that is processed in 
facilities other than a processing plant in which Lessee or an 
affiliate of Lessee has a direct or indirect interest, the Royalty 
Fraction of the market value at the plant of all processed liquids 
credited to the account of Lessee and attributable to the gas plus 
the Royalty Fraction of the market value of all residue gas at the 
point of sale, use, or other disposition, less the deductions 
authorized in subparagraph 4(c) below. 

(b) The market value of gas will be determined at the specified location by 
reference to the gross heating value (measured in British thermal units) and quality of the 
gas. The market value used in the calculation of oil and gas royalty will never be less than 
the proceeds received by Lessee in connection with the sale, use, or other disposition of 
the oil or gas produced or sold. For purposes of this paragraph, if Lessee receives from a 
purchaser of oil or gas any reimbursement for all or any part of severance or production 
taxes, or if Lessee realizes proceeds of production after deduction for any expense of 
production, gathering, dehydration, separation, compression, transportation, treatment, 
processing, storage, marketing, or remediation, then the reimbursement or the deductions 
will be added to the proceeds received by Lessee except as set forth in subparagraph 4(c) 
below ♦ Royalty will be payable on oil and gas produced from the Land and consumed by 
Lessee on the Land for compression, dehydration, fuel, or other use. 

(c) Except as permitted herein, it is agreed between the Lessor and Lessee, 
that, notwithstanding any language herein to the contrary, all oil, gas or other proceeds 
accruing to the Lessor under this Lease or by state law shall be without deduction for the 
cost of producing, gathering, storing, separating, treating, dehydrating, compressing, 
processing, transporting, and marketing the oil, gas and other products produced 
hereunder to transform the product into marketable form. Further, in no event shall 
Lessor receive a price that is less than the price received by Lessee from an arms-length 
contract with a purchaser that is not an affiliate of Lessee. It is the specific intent of the 
parties to this Lease that this provision is to be treated as enforceable as written and is not 
to be deemed "surplusage" under the principals set forth in Heritage Resources v. Nations 
Bank, 939 S.W.2d 1 18 (Tex. 1997). Notwithstanding the foregoing, Lessor's royalty will 
bear its share of all severance and productions taxes and if a third party, that is not an 
affiliate of Lessee, compresses, transports, processes, or treats gas produced from the 
Land to receive a better price, Lessor's royalty will bear its proportionate share of the 
additional costs and expenses associated therewith, even if such third party charges are 
passed through an affiliate of Lessee. 

(d) If gas produced from the Land or lands pooled herewith is sold by Lessee 
pursuant to an arms-length contract with a purchaser that is not an affiliate of Lessee, and 
for a term no longer than that which is usual and customary in the industry at the time the 
contract is made, then the market value of the gas sold pursuant to the contract shall be 
the total proceeds received by Lessee in the sale, subject to the provisions of paragraph 
4(b) above. 

(e) Lessor shall be paid the Royalty Fraction of all payments and other 
benefits made under any oil or gas sales contract or other arrangement, including take-or- 
pay payments and payments received in settlement of disputes; provided that if Lessor 
receives a take-or-pay payment or similar payment for gas that has not been produced, 
and if the gas is subsequently produced, Lessor will receive only its Royalty Fraction of 
the market value of the volume of gas for which payment has not already been made. 

(f) Unless there is a reasonable title dispute, Lessee must disburse or cause to 
be disbursed to Lessor its royalty on production from a particular well not later than 120 
days after the end of the month of first sales of production. Thereafter, Lessee must 
disburse or cause to be disbursed to Lessor its royalty on production by the last day of the 
second month after the month in which production is sold. If not paid when due, Lessor's 
royalty will bear interest at Eighteen Percent (18%) annual from due date until paid, 
which amount Lessee agrees to pay. Acceptance by Lessor of royalties that are past due 
will not act as a waiver or estoppel of its right to receive interest due thereon unless 



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Lessor expressly so provides in writing signed by Lessor. The royalty payment 
obligations under this Lease shall not be affected by any division order or the provisions 
of the Section 91.402 of the Texas Natural Resources Code or any similar statute. 
Notwithstanding anything to the contrary contained in this Lease, should a royalty 
payment not be made for a period of one year from the anniversary date of the due date as 
provided for in this Lease, unless there is then in effect another applicable preservation 
provision of this Lease, Lessor may, at Lessor's option, elect to terminate the applicable 
portion of this Lease by sending written notice to Lessee by certified mail. Lessee shall 
then have ninety (90) days from the date of service of such written notice in which to 
avoid termination of the applicable portion this Lease by making or causing to be made 
the proper royalty payment. If such royalty payment is not made on or before the 
expiration of said 90 day period, or written approval is not obtained from Lessor to defer 
such payment, Lessor may elect to tenninate the applicable portion of this Lease by filing 
a Notice of Termination with the County Clerk in the county where the Land is located. 
The effective date of said termination shall be the date said Notice of Termination is filed 
with the said County Clerk. 

(g) As used in this Lease, "affiliate" means (i) a corporation, joint venture, 
partnership, or other entity that owns more than ten percent of the outstanding voting 
interest of Lessee or in which Lessee owns more than ten percent of the outstanding 
voting interest; or (ii) a corporation, joint venture, partnership, or other entity in which, 
together with Lessee, more than ten percent of the outstanding voting interests of both 
Lessee and the other corporation, joint venture, partnership, or other entity is owned or 
controlled by the same persons or group of persons. 

(h) The receipt by Lessee from a purchaser or a pipeline company of proceeds 
of production for distribution to Lessor will not result in Lessee acquiring legal or 
equitable title to those proceeds, but Lessee will at all times hold Lessor's share of those 
proceeds for the benefit of Lessor. Notwithstanding the insolvency, bankruptcy, or other 
business failure of a purchaser of production from the Land or pipeline company 
transporting production from the Land, Lessee will remain liable for payment to Lessor 
for, and agrees to pay Lessor all royalties due Lessor together with interest if not timely 
paid. 

(i) If gas is produced from the Land, and if (either because this Lease covers 
less than all of the gas or other substances in and under the Land or because of 
assignments by Lessee of undivided interests in this Lease) more than one party owns the 
working interest share of the gas produced, and if any or all of such co-owners elect to 
take and market their share of such gas separately, resulting in "split-stream" deliveries of 
such gas to different purchasers, then the following shall apply: 

(1) Lessor shall be entitled to Lessor's royalty share (proportionately 
reduced, as herein provided, if Lessor owns less than all the applicable gas 
and/or other substances under the Land) of the proceeds of the sale of the 
entire production of the gas produced from the Land, regardless of how 
such gas is allocated among the working interest owners or to whom such 
gas is sold, and regardless of any agreements to the contrary among the 
working interest owners or other parties; and 

(2) Lessee, its successors and assigns, shall be liable for Lessor's entire 
royalty on such gas production, regardless of whether Lessee actually is 
allocated or receives any proceeds of sale of any such production. Lessee 
shall account to Lessor for all of Lessor's royalty share of such gas 
production, so that Lessor shall not be required to receive royalties from 
more than one purchaser or working interest owner, and Lessee shall 
provide production statements from all purchasers of such gas showing the 
volumes sold and the price paid therefore, and any applicable adjustments. 

5. Shut-in Royalty. After the Primary Term, or any time thereafter, if there is a gas 
well on this Lease or on lands pooled with the Land capable of producing in paying 
quantities, but gas is not being sold for a period of sixty (60) consecutive days, and this 
Lease is not otherwise being maintained, Lessee shall pay or tender in advance an annual 
shut-in royalty of $100.00 per net mineral acre then covered by this Lease. Payment with 
respect to a well will be due within 60 days after the later of (i) the date the well is shut- 



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in, or (ii) the date this Lease is not otherwise being maintained. Thereafter, while such 
well remains shut-in, Lessee shall make like shut-in payments or tenders at annual 
intervals on or before the anniversary of the date the first payment is due. While shut-in 
royalty payments are timely and properly paid, this Lease shall be considered as 
producing in paying quantities for all purposes of this Lease. The obligation of Lessee to 
pay shut-in royalty is a condition and not a covenant. The payment or tender of royalty 
under this paragraph may be made by the check of Lessee mailed or delivered to the 
parties entitled thereto on or before the due date. Lessee may exercise its right to make 
shut-in royalty payments as provided for herein from time to time. Notwithstanding 
anything herein to the contrary, this Lease shall not be maintained by shut-in royalty 
payments for periods totaling more than three (3) years of cumulative time. 

Notwithstanding anything to the contrary contained in this Lease, at the option of Lessee, 
which may be exercised by Lessee giving notice to Lessor, a well which has been drilled 
and Lessee intends to frac shall be deemed a well capable of producing in paying 
quantities and the date such well is shut-in shall be when the drilling operations are 
completed. 

Notwithstanding anything to the contrary contained in this Lease, should a shut-in royalty 
payment not be properly made in a timely manner as provided for in this Lease, unless 
there is then in effect another applicable preservation provision of this Lease, Lessor 
may, at Lessor's option, elect to teiminate the applicable portion of this Lease by sending 
written notice to Lessee by certified mail. Lessee shall then have thirty (30) days from 
the date of service of such written notice in which to avoid termination of the applicable 
portion this Lease by making or causing to be made the proper shut-in royalty payment. 
If such shut-in royalty payment is not made on or before the expiration of said 30 day 
period, or written approval is not obtained from Lessor to defer such payment, Lessor 
may elect to terminate the applicable portion of this Lease by filing a Notice of 
Termination with the County Clerk in the county where the Landis located. The effective 
date of said termination shall be the date said Notice of Termination is filed with the said 
County Clerk. 

6. Continuous Operations. If, at the expiration of the Primary Term, oil or gas is 
not being produced from the Land or lands pooled herewith, but Lessee is then engaged 
operations (as defined below) on the Land or lands pooled herewith, or shall have 
completed a dry hole thereon within 60 days prior to the end of the Primary Term, the 
Lease will not terminate but will remain in effect for so long thereafter as operations on 
said well or any additional well are carried out with due diligence with no cessation of 
more than ninety (90) days, and if the operations result in the production of oil or gas, so 
long thereafter as oil or gas is produced from the Land or from land pooled therewith. 
For the purposes of this Lease, the term "operations" means operations for any of the 
following: drilling, testing, completing, reworking, recompleting, deepening, plugging 
back, or repairing of a well in search for or in the endeavor to obtain production of oil or 
gas. Further, the term "production" in this Lease means production in paying quantities. 
If, after the expiration of the Primary Term and after oil and gas is produced from the 
Land, or from land pooled therewith, the production thereof should cease from any cause, 
this Lease shall not terminate if Lessee commences operations within 60 days after the 
cessation of such production, but shall remain in force and effect so long as such 
operations are prosecuted with no cessation of more than 60 consecutive days, and if they 
result in the production of oil or gas, so long thereafter as oil or gas is produced from the 
Land, or from land pooled therewith. 

7. Pooling. Lessee shall have the right but not the obligation to pool all or any part 
of the Land or interest therein with any other lands or interests, as to any or all depths or 
zones, and as to any or all substances covered by this Lease, either before or after the 
commencement of production or operations, whenever Lessee deems it necessary or 
proper to do so in order to prudently develop or operate the Land, whether or not similar 
pooling authority exists with respect to such other lands or interests. The unit formed by 
such pooling for an oil well which is not a horizontal completion shall not exceed 40 
acres plus a maximum acreage tolerance of 10%, and for a gas well or a horizontal 
completion shall not exceed 640 acres plus a maximum acreage tolerance of 10%; 
provided that a larger unit may be formed for an oil well or gas well or horizontal 
completion to conform to any well spacing or density pattern that may be prescribed or 



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permitted by any governmental authority having jurisdiction to do so. For the purpose of 
the foregoing, the terms "oil well" and "gas well" shall have the meanings prescribed by 
applicable law or the appropriate governmental authority, or, if no definition is so 
prescribed, "oil weir means a well with an initial gas-oil ratio of less than 100,000 cubic 
feet per barrel and "gas well" means a well with an initial gas-oil ratio of 100,000 cubic 
feet or more per barrel, based on 24-hour production test conducted under normal 
producing conditions using standard lease separator facilities or equivalent testing 
equipment; and the term "horizontal completion" means an oil or gas well in which the 
horizontal component of the gross completion interval in the reservoir exceeds the 
vertical component thereof. In exercising its pooling rights hereunder, Lessee shall file 
of record a written declaration describing the unit and stating the effective date of 
pooling. Production or operations anywhere on a unit which includes all or any part of 
the Land shall be treated as if it were production or operations on the Land, except that 
the production on which Lessor's royalty is calculated shall be that proportion of the total 
unit production which the total net acreage covered by this Lease and included in the unit 
bears to the total surface acreage in the unit. Pooling in one or more instances shall not 
exhaust Lessee's pooling rights hereunder, and Lessee shall have the recurring right but 
not the obligation to revise any unit formed hereunder by expansion or contraction or 
both, either before or after commencement of production, in order to conform to the well 
spacing or density pattern prescribed or permitted by the governmental authority having 
jurisdiction, or to conform to any productive acreage detennination made by such 
governmental authority* Further, in making such a revision, Lessee shall file of record a 
written declaration describing the revised unit and stating the effective date of revision. 
To the extent any portion of the Land is included in or excluded from the unit by virtue of 
such revision, the proportion of unit production on which royalties are payable hereunder 
shall thereafter be adjusted accordingly. In the absence of production in paying quantities 
from a unit, or upon permanent cessation thereof, Lessee may terminate the unit by filing 
of record a written declaration describing the unit and stating the date of termination. 
Pooling hereunder shall not constitute a cross-conveyance of interests. If this Lease now 
or hereafter covers separate tracts, no pooling or unitization of royalty interest as between 
any such separate tracts is intended or shall be implied or result merely from the inclusion 
of such separate tracts within this Lease but Lessee shall nevertheless have the right to 
pool as provided above with consequent allocation of production as above provided. As 
used in this paragraph, the words "separate tract" mean any tract with royalty ownership 
differing, now or hereafter, either as to parties or amounts, from that as to any other part 
of the Land. 

Royalties shall be computed on the portion of production allocated to the Land. 
No part of the Land may be included in a pooled unit unless all of the Land is included in 
said pooled unit 

Lessee will not implement any re-pressuring, pressure maintenance, recycling or 
secondary recovery operations without the prior written consent of Lessor, which shall be 
at Lessor's sole discretion. 

8. Offset Wells. This offset obligation shall go into effect one (1) year after the 
effective date of this Lease and shall not apply to any well drilled prior to the effective 
date of this Lease. If the nearest bottom-hole producing perforations in a well capable of 
producing oil or gas or other hydrocarbons in paying quantities should hereafter be 
completed within three hundred thirty (330) feet of the Land then, within one hundred 
twenty (120) days after the offsetting well continuously produces in paying quantities for 
sixty (60) consecutive days (but subject to Paragraph 1 1 hereof), Lessee shall commence 
operations for and thereafter diligently prosecute the drilling of an offset well at a 
permitted location which is reasonably designed to protect the Land from drainage. 
Lessee's obligation to drill under this paragraph shall not apply if the 40 acres nearest the 
offsetting well as to the formation in which the offsetting well is producing is already 
included within a pooled unit or proration unit as determined by Lessee. Lessor and 
Lessee agree that this offset provision shall supersede and replace any implied obligations 
of Lessee to protect against drainage during the Primary Term of this Lease and after the 
Primary Term (if perpetuated), whether or not Lessee is the operator or an interest owner 
as to any offsetting well. 



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9. NO SURFACE OPERATIONS/ OFFSITE OPERATIONS. 
NOTWITHSTANDING ANY LANGUAGE CONTAINED HEREIN TO THE 
CONTRARY, LESSEE HEREBY WAIVES AND RELEASES ALL SURFACE 
RIGHTS OF EVERY KIND AND NATURE ACQUIRED UNDER THIS LEASE, 
IF ANY, OTHER THAN THE RIGHT TO SURVEY DURING THE PRIMARY 
TERM. ACCORDINGLY, LESSEE SHALL NOT (I) CONDUCT ANY SURFACE 
OPERATIONS WHATSOEVER UPON THE LAND, (II) PLACE ANY 
PERSONAL PROPERTY, FIXTURES OR EQUIPMENT UPON THE LAND, OR 
OH) ENTER UPON THE SURFACE OF THE LAND FOR ANY REASON OR 
FOR ANY AMOUNT OF TIME; HOWEVER, THIS LIMITATION SHALL NOT 
AFFECT THE RIGHT OF LESSEE OR ITS SUCCESSORS AND ASSIGNS TO 
ENTER THE LAND FOR SURVEYING OR UTILIZE THE SUBSURFACE OF 
THE LAND OR ENGAGE IN DIRECTIONAL OR HORIZONTAL DRILLING 
ACTIVITIES OR OPERATIONS WHICH COMES UNDER THE LAND AND/OR 
FROM POOLING IN ACCORDANCE WITH THIS LEASE, BUT IN NO EVENT 
MAY THE MINING OR DRILLING ACTIVITIES OR OPERATIONS 
PENETRATE THE LAND AT A DEPTH OF LESS THAN 1,000 FEET BELOW 
THE SURFACE. FURTHER, LESSEE WILL MEET ALL CITY ORDINANCES 
IN THE DRILLING OF WELLS FROM SURFACE LOCATIONS THAT OFFSET 
THE LAND, BUT IN NO EVENT SHALL LESSEE DRILL A WELL AT A 
SURFACE LOCATION THAT IS WITHIN 300 FEET OF THE LAND. THIS 
PROVISION SHALL SURVIVE TERMINATION OF THE LEASE. 

As a result of land development in the vicinity of the Land, governmental rules or 
ordinances regarding well sites, and/or surface restrictions as may be set forth in this 
Lease and/or other leases in the vicinity, surface locations for well sites in the vicinity 
may be limited and Lessee may encounter difficulty securing surface location(s) for 
drilling, reworking or other operations. Therefore, since drilling, reworking or other 
operations are either restricted or not allowed on the Land or other leases in the vicinity, 
it is agreed that any such operations conducted at a surface location off of the Land or off 
of lands with which the Land is pooled in accordance with this Lease, provided that such 
operations are associated with a directional well for the purpose of drilling, reworking, 
producing or other operations under the Land or lands pooled therewith, shall for 
purposes of this Lease be deemed operations conducted on the Land. Nothing contained 
in this paragraph is intended to modify any surface restrictions or pooling provisions or 
restrictions contained in this lease, except as expressly stated. 

10. Assignments. The rights and estate of any party hereto may be assigned from 
time to time in whole or in part and as to any mineral or horizon. Lessee shall notify 
Lessor in writing of any assignment or sublease of this Lease only if assigned to a 
company of lesser financial viability than XTO Energy at the time of Assignment. Lessee 
and its assignees and sublessee's of an interest in this Lease shall be severally liable. No 
change or division in ownership of the Land or royalties however accomplished shall 
operate to enlarge the obligations or diminish the rights of Lessee; and no such change in 
ownership shall be binding on Lessee nor impair the effectiveness of any payments made 
hereunder until Lessee shall have been furnished, thirty (30) days before payment is due, 
a certified copy of the recorded instrument evidencing any transfer, inheritance, sale or 
other change in ownership. 

11. Force Majeure. Should Lessee be wholly prevented by reason of Force Majeure 
from complying with any express or implied covenant of this Lease (other than a 
requirement to pay money), from conducting operations on the Land or lands pooled with 
the Land, or from producing oil or gas, then while so prevented, that covenant will be 
suspended; Lessee will not be liable for damages for failure to comply therewith; this 
Lease will be extended so long as Lessee is prevented from conducting operations on or 
from producing oil or gas from lands pooled with the Land, but in no event for more than 
six months per occurrence and the total time which this lease may be extended by this 
paragraph may not exceed Two years; and the time while Lessee is so prevented will not 
be counted against Lessee. "Force Majeure" means any Act of God, riot, war, strike, 
insurrection, any federal or state law, or any rule or regulation of governmental authority, 
or other similar cause (other than financial reasons), lack of a suitable market or other 
causes beyond the control of Lessee, BUT NOT for Lessee's failure to obtain a necessary 



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permit for its operations from a local, state or federal governing body. Before the 
provisions of this paragraph may be relied upon by Lessee, Lessee must first furnish 
written notice to Lessor, within a reasonable time after the first day of the provisions 
hereof are relied upon, of such event, giving the beginning date thereof; and, within a 
reasonable time after such event ceases, notify Lessor of the resumption of activities. 

12. Warranty and Proportionate Reduction. 

Lessor makes no warranty of any kind, either express or implied, with respect to 
title to the Land or the minerals subject to this Lease. However, if Lessor owns an 
interest in the Land or the minerals subject to this Lease less than the entire fee 
simple estate, then the royalties payable hereunder will be reduced proportionately. 
By acceptance of this Lease, Lessee acknowledges that it has been given full 
opportunity to investigate and has conducted sufficient investigation to satisfy itself 
as to the title to the Land and the minerals subject to this Lease, and Lessee assumes 
all risk of title failures, and in connection therewith Lessee shall have no recourse 
against Lessor, including no right to a refund of the bonus and royalties paid for or 
under this Lease. Further, in the event Lessor does not own all of the minerals 
subject to his Lease, Lessee agrees that it will not conduct operations on the surface 
of the Land. This provision shall survive termination of the Lease. 

13. Notices. All notices will be deemed given and reports will be deemed delivered if 
sent by certified letter, return receipt requested, properly addressed and deposited in the 
United States Postal Service, postage prepaid, to Lessor and Lessee at the addresses 
shown above. Either party may designate a new address by written notice to the other 
party. 

14. Attorney's Fees. In the event that Lessor or Lessee is required to employ legal 
counsel for the enforcement of any provision of this Lease and receives a final 
unappealable judgment, the prevailing party will be entitled to recover from the other 
party the reasonable attorney's fees and expenses incurred by said party. 

15. Insurance. At all times while this Lease is in force, Lessee shall acquire and 
maintain insurance in compliance with City of Grapevine oil and gas ordinance, as 
amended and any other municipal authority having jurisdiction over the Land and/or 
operations conducted upon the Land. 

16. Indemnity. LESSEE AGREES TO INDEMNIFY AND HOLD HARMLESS 
LESSOR, AND LESSOR'S REPRESENTATIVES, EMPLOYEES, TRUSTEES, 
VOLUNTEERS, AGENTS, SUCCESSORS, AND ASSIGNS AGAINST ALL 
EXPENSES, CLAIMS, DEMANDS, LIABILITIES, AND CAUSES OF ACTION 
OF ANY NATURE FOR INJURY TO OR DEATH OF PERSONS AND LOSS OR 
DAMAGE TO PROPERTY, WHETHER THE CLAIMS ARE BROUGHT OR 
PURSUED AS CLAIMS OF NEGLIGENCE, BREACH OF CONTRACT, 
NUISANCE, TORT, STRICT LIABILITY, OR OTHERWISE, AND INCLUDING, 
WITHOUT LIMITATION, REASONABLE ATTORNEY FEES, EXPERT FEES, 
AND COURT COSTS, CAUSED BY LESSEE'S ACTIVITIES AND 
OPERATIONS ON THE LAND, OR LESSEE'S MARKETING OF 
PRODUCTION FROM THE LAND, OR ANY VIOLATION OF ANY 
ENVIRONMENTAL REQUIREMENTS BY LESSEE. AS USED IN THIS 
PARAGRAPH, THE TERM "LESSEE" INCLUDES LESSEE, ITS AGENTS, 
EMPLOYEES, SERVANTS, CONTRACTORS, AND ANY OTHER PERSON 
ACTING UNDER ITS DIRECTION AND CONTROL, AND ITS INDEPENDENT 
CONTRACTORS. AS USED IN THIS PARAGRAPH, THE TERM "LAND" 
INCLUDES THE LAND COVERED BY THIS LEASE OR ANY LANDS POOLED 
THEREWITH. LESSEE'S INDEMNITY OBLIGATIONS SURVIVE THE 
TERMINATION OF THIS LEASE. 

17. Payment of Royalties, The rights of Lessor under this Lease shall be in addition 
to, and not in lieu of, all rights Lessor may have as to payment of royalty under Texas 
law, including, without limitation, V.T.C.A. NATURAL RESOURCES CODE §§ 9L401 
through 91.405, 



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18. Inspection of Lessee's Records. Upon written request, Lessor and/or Lessor's 
representative shall have the right to inspect all lease and title records and well records of 
Lessee relating to the production data attributable to this Lease, , including the right to 
audit Lessee's books insofar as they relate to the calculation of Lessor's royalties. Such 
inspection shall be limited to an annual basis only, during Lessee's normal business hours 
and be exercised by Lessor by giving Lessee not less than thirty (30) business days prior 
notice; provided, however, such audit rights shall not extend to any periods which are 
twenty-four months (24) prior to the date of such audit notice. Lessor shall bear all costs 
and expenses of any such audit. 

19. Implied Covenants, Except as otherwise expressly provided herein, nothing in 
this Lease negates the implied covenants imposed upon Lessee under applicable law, 

20. Division Orders. If Lessee shall require the execution of a division order for 
payment of royalty payable under this lease, then the only form of division order 
permitted for Lessee's use shall be such form promulgated by the State of Texas and set 
forth in Section 91.402(d), of the Texas Natural Resources Code as amended from time to 
time. Transfer orders, if required, shall be solely for the purpose of confirming the 
interest transferred by Lessor. In the event of production, all division orders prepared by 
Lessee and its assigns shall eliminate all references to ratification of Lessee's acts and 
ratification of any related gas or oil purchase contracts. If such statements are contained 
therein, such ratifications are void and of no effect. Any amendment, alteration, 
extension or ratification of this lease, or of any term or provision of this lease, shall be 
made only by an instrument clearly denominating its purpose and effect, describing the 
specific terms or provisions affected and the proposed change or modification hereof, and 
executed by the party against whom any such amendment, alteration, extension or 
ratification is sought to be enforced, and any purported amendment, alteration, extension 
or ratification not so drafted shall be of no force or effect. 

21. Compliance with Governing Law. Lessee will conduct all operations under this 
Lease and/or on lands pooled herewith in compliance with the current and future rules of 
the Railroad Commission of Texas, and all federal, state and local laws, rules, 
regulations, and ordinances, including without limitation all environmental laws, rules, 
regulations and ordinances. 

22. Excess Royalty Payments. Any payment of royalty or Shut-in Royalty 
hereunder paid to Lessor in excess of the amount actually due to the Lessor shall 
nevertheless become the property of Lessor if Lessee does not make written request to 
Lessor for reimbursement within one (1) year from the date that Lessor received the 
erroneous payment, it being agreed and expressly understood between the parties hereto 
that Lessor is not the collecting agent for any other royalty owner under the Land, and a 
determination of the name, interest ownership and whereabouts of any person entitled to 
any payment whatsoever under the terms hereof shall be the sole responsibility of Lessee. 
Should monthly royalty payments cease under this Lease prior to Lessee recouping any 
such overpayments out of a portion of Lessor's monthly royalty, Lessee shall absorb such 
loss in its entirety without any liability to or reimbursement from Lessor. 

23. Depth Severance. One (1) Year after the primary term of this Lease, this Lease 
shall terminate as to all depths lying below one hundred feet (100') below the 
stratigraphic equivalent of the deepest formation drilled; provided, however, if Lessee is 
then engaged in operations on the Land or on lands pooled therewith, this Lease shall 
remain in full force and effect as to all depths so long as no more than ninety (90) days 
elapse between said operations 

24. Damages. Should Lessor or tenants on the Land suffer loss or damage to trees, 
water wells, fences and other personal property, buildings or other improvements as a 
result of the operations of Lessee under the terms of this lease, Lessee agrees to pay 
Lessor or tenants the actual amount of their loss or damage. 

25. Subordination Agreement. Lessee shall not require Lessor to furnish a 
subordination agreement of any kind as a condition for receipt of any royalty payment or 
other payment obligation hereunder. Upon request, Lessor shall (i) disclose to Lessee 
contact information for any such lienholder, (ii) consent to Lessee making contact with 
any such lienholder, and consent to such lienholder disclosing the status of any such lien 



Page 9 of 13 



and the underlying obligation, and (iii) agree to reasonably cooperate with Lessee to 
obtain such subordination agreement from Lessor's lender(s). Lessee shall pay all fees 
and expenses charged by Lessor's lender for any subordination agreement sought by 
Lessee. 

26. Release. In the event this Lease terminates for any reason as to all or any part of 
the Land, Lessee shall, within 60 days thereafter, deliver to Lessor a recordable release 
covering all of the Land or that portion of the Land as to which this Lease terminated 

27. Environmental and Operational Provisions. Lessee's operations are being 
conducted in or near an urban residential area. Therefore, with regard to any well drilled 
within 600 feet of said Land, Lessee shall: 

(1) Equip any and all compressors, machinery and drilling equipment 
with noise suppression, muffling devices and pollution constraints. 

(2) Not operate or maintain any compressors within 600 feet of said 
Land, except ones to be used solely for gas odorizing or initial gas lift purposes and 
Lessee shall take all reasonable steps to muffle any sound or noise from its compressors, 

(3) Lessee agrees to comply with all environmental and operational 
requirements of City of North Richland Hills Oil and Gas Ordinance, as amended, and 
any other municipal authority having jurisdiction over the Land and/or operations 
conducted upon the Land unless variances are granted by City Council. 

(4) Provide fencing around the drillsite tract in order to reasonably and 
effectively prevent the migration of vermin and small animals to the adjacent properties 
and lands; 

(5) While drilling operations are taking place, place lighting directed 
on the derrick and drill site area for safety reasons, and take all reasonable precautions to 
avoid directing the lighting onto surrounding neighborhoods and properties. 

(6) Lessee shall use all reasonable safeguards to prevent contamination 
or pollution of any environmental medium, including soil, surface waters, groundwater, 
sediments, and surface or subsurface strata, ambient air or any other environmental 
medium in, on, or under the Land or lands pooled therewith, by any waste, pollutant, or 
contaminant. Lessee shall not bring or permit to remain on the Land or lands pooled 
therewith any asbestos containing materials, explosives, toxic materials, or substances 
regulated as hazardous wastes, hazardous materials, hazardous substances (as the term 
"Hazardous Substance" is defined in the Comprehensive Environmental Response 
Compensation and Liability Act (CERCLA), 42 U.S. C. Sections 9601, et seq.) or toxic 
substances under any federal, state or local law or regulation ("Hazardous Materials"), 
except ordinary products commonly used in connection with oil and gas exploration and 
development operations and stored in the usual manner and quantities. LESSEE 
SHALL INDEMNIFY, HOLD HARMLESS AND DEFEND LESSOR, ITS 
AGENTS, EMPLOYEES, TENANTS, GUESTS, INVITEES AND THEIR 
RESPECTIVE SUCCESSORS AND ASSIGNS FROM AND AGAINST ANY 
CLAIMS, DAMAGES, JUDGMENTS, PENALTIES, LIABILITIES, AND COSTS 
(INCLUDING REASONABLE ATTORNEYS FEES AND COURT COSTS) 
CAUSED BY (1) LESSEE'S VIOLATION OF THE FOREGOING 
PROHIBITION OR (2) LESSEE'S RELEASE OR DISPOSAL OF ANY 
HAZARDOUS MATERIALS ON, UNDER OR ABOUT SAID LAND OR LANDS 
POOLED THEREWITH DURING LESSEE'S OCCUPANCY OR CONTROL OF 
SAME. LESSEE SHALL CLEAN UP, REMOVE, REMEDY, AND REPAIR ANY 
SOIL OR GROUND WATER CONTAMINATION AND DAMAGE CAUSED BY 
LESSEE'S RELEASE OF ANY HAZARDOUS MATERIALS IN, ON, UNDER OR 
ABOUT SAID LAND OR LANDS POOLED THEREWITH DURING LESSEE'S 
OCCUPANCY OF SAME IN CONFORMANCE WITH THE REQUIREMENTS 
OF APPLICABLE LAW. THIS INDEMNIFICATION AND ASSUMPTION 
SHALL APPLY, BUT IS NOT LIMITED TO, LIABILITY FOR RESPONSE 
ACTIONS UNDERTAKEN PURSUANT TO CERCLA OR ANY OTHER 
ENVIRONMENTAL LAW OR REGULATION. LESSEE SHALL 
IMMEDIATELY GIVE LESSOR WRITTEN NOTICE OF ANY BREACH OR 



Page 10 of 13 



SUSPECTED BREACH OF THIS PARAGRAPH, UPON LEARNING OF THE 
PRESENCE OF ANY HAZARDOUS MATERIALS, OR UPON RECEIVING A 
NOTICE PERTAINING TO HAZARDOUS MATERIALS WHICH AFFECT 
SAID LAND OR LANDS POOLED THEREWITH. THE OBLIGATIONS OF 
LESSEE HEREUNDER SHALL SURVIVE THE EXPIRATION OR EARLIER 
TERMINATION FOR ANY REASON, OF THIS LEASE. 

28. Dwellings. No structure of any kind shall be used as a dwelling house for any 
persons associated with the operations on lands pooled with the Land, 

29. Groundwater Protection. Any oil or gas wells drilled by Lessee under this 
Lease shall be drilled in compliance with the surface casing requirements imposed by the 
State of Texas for groundwater protection and Lessee shall install such surface casing in 
the required manner in order to insure the protection of all fresh water bearing formations 
in and under the Land. 

30. Visual Appearance. Lessee shall maintain any drillsites within 500 feet of the 
Land in a clean and orderly fashion. 

31. Mud Pits. Lessee shall locate no mud pits on lands located within 500 feet of the 
Land. 

32. Headings. Paragraph headings are used in this Lease for convenience only and 
are not to be considered in the interpretation or construction of this Lease. 

33. Binding Effect. This Lease is binding upon and for the benefit of Lessor, Lessee, 
and their respective heirs, personal representatives, successors, and assigns. 

34. Jurisdiction and Venue. Jurisdiction and venue for any legal dispute between 
Lessor and Lessee related in any way to this lease shall be in the court(s) of competent 
jurisdiction located in Tarrant County, Texas. 

35. Option to Extend. Lessee is hereby given the option, to be exercised prior to the 
date on which this lease or any portion thereof would expire in accordance with its terms 
and provisions of extending this lease for a period of two (2) years as to all or any portion 
of the acreage then held hereunder which would expire unless so extended. The only 
action required by Lessee to exercise such option being the payment to Lessor (or for 
Lessor's credit at the depository bank named herein) and/or such parties entitled under 
any change of ownership according to Lessee's records, an additional consideration of 
the sum of Twenty Thousand Dollars ($20,000) per net mineral acre owned by the 
parry entitled to such payment at such time of extension, in the acreage so extended. If 
this lease is extended as to only a portion of the acreage then covered hereby, Lessee 
shall designate such portion by a recordable instrument. 

36. Free Will. Be it known that Lessor has read this lease and the decision made by 
Lessor in signing this lease is made after fully researching this matter independent of any 
other information provided by any person or entity. Lessor agrees to sign this agreement 
of their own free will and Lessor was in no way coerced to sign said Lease by any person 
or entity. All proceeds from the Lease fully remain the property of the Lessor. 

37. Memorandum of Oil and Gas Lease. Contemporaneously with the execution of 
this Lease, Lessor and Lessee have executed a Memorandum of Oil and Gas Lease, and 
Lessor and Lessee agree that such Memorandum of Oil and Gas Lease, which makes 
reference to this Lease, will be recorded in the appropriate records of the counties in 
which said Land is located in lieu of the recording of this Lease in its entirety. The 
recording of said Memorandum of Oil and Gas Lease shall be binding upon Lessor and 
Lessee, and their respective heirs, successors, legal representatives and assigns, the same 
as if this Lease was filed of record in its complete text. 

38. Counterparts. This Lease may be executed in any number of counterparts of 
each of the Lessors as identified on Schedule I hereto and each counterpart of a Schedule 
I hereto so executed shall have the same force and effect as an original instrument and as 
if all the parties to the aggregate counterparts had signed the same instrument. For 
recording purposes, the counterpart signature and acknowledgment of the Schedule I of 



Page 11 of 13 



each of the Lessors may be included in one instrument to be filed for record in the 
records of the County Clerk of Tarrant County, Texas. 

39. This Lease is binding upon and for the benefit of Lessor, Lessee, and their 
respective heirs, personal representatives, successors, and assigns 

40. Release and Discharge. Lessor acknowledges that the terms of the Lease, this 
addendum, the amount of the royalty and bonus paid hereunder, and all other terms 
negotiated with Lessee (herein the "Negotiated Terms") with respect to this Lease, were 
obtained as a result of negotiations between Lessee and the group known as GRNA, 
which consists of a committee of unpaid volunteers. In consideration of the efforts spent 
by GRNA, the committee members, other volunteers and attorneys in negotiating and 
obtaining the Negotiated Terms on behalf of Lessor, Lessor and its respective agents, 
spouses, co-owners, predecessors, parents, subsidiaries, affiliated corporations, or other 
affiliated entities, successors, partners, principals, assigns, attorneys, servants, agents, 
employees, heirs, consultants and other representatives, does hereby release and forever 
discharge GRNA, the committee members, and any volunteers or attorneys representing 
GRNA, from any and all claims, demands, obligations, losses, causes of action, costs, 
expenses, attorney's fees, and liabilities of any nature whatsoever, whether based on 
contract, tort, statutory or other legal or equitable theory of recovery, whether known or 
unknown, past, present, or future, which Lessor has, has had, or claims to have against 
the individual committee members, volunteers, or GRNA which relate to, arise from, or 
are in any manner connected to (i) the Negotiated Terms, (ii) the negotiation of the 
Negotiated Terms, (iii), the inclusion and/or omission of any terms within the Negotiated 
Terms, (iv) any activity, act or omission in any way related to the Negotiated Terms or 
the negotiation of the Negotiated Terms or (v) any and all representations made prior, 
during, and subsequent to Lessor's execution of this Lease and Amendment. 

41. Lessor Acknowledgement. GRNA is an all volunteer group of residents and local 
property owners in the vicinity of the Land. The group's purpose is to unite in the hopes 
of negotiating the best terms possible with respect to an oil and gas lease with Lessee. By 
signing this Lease, Lessor acknowledges and stipulates that Lessor was not obligated to 
sign this Lease based upon the terms negotiated by GRNA with Lessee and that Lessor 
had the right to negotiate its own terms and with any company prior to signing this Lease. 
Additionally, Lessor acknowledges that it is Lessor's obligation to investigate this Lease, 
all negotiated terms, to take such action as necessary to make an informed decision prior 
to signing this Lease, and that the decision made by Lessor in signing this Lease is made 
after fully researching this matter independent of any other information provided by 
GRNA and/or its committee members, representatives and/or attorneys. Lessor agrees 
and acknowledges that it is ultimately Lessor's responsibility to (a) determine if Lessor 
wants to negotiate with Lessee, (b) fully investigate the issues and facts related to signing 
an oil and gas lease, and (c) determine what terms are acceptable to Lessor to be included 
in this Lease. 



SEE EXHIBIT 4 A* FOR LEGAL DESCRIPTION 




IN WITNESS WHEREOF, this instrument is executed on the date first above written. 



Page 12 of 13 



STATE OF TEXAS } 



}ss. 



(ACKNOWLEDGMENT FOR INDIVIDUAL) 



COUNTY OF 



This instrument was acknowledged before me on the $ a y f ""^jifLil 

Sylvia D. Flores. 



2009 by 




Seal 



j Notary Public ^—y 



Page 13 of 13 



EXHIBIT "A" 



0.273 acres, more or less, and being Blk 2, Lot 35, Heatherwood Estates Addition, an 
Addition to the City of Hurst, Tarrant County, Texas, according to the Plat recorded in 
Volume 388-197, Page 37, Plat Records, Tarrant County, Texas, and being those same lands 
more particularly described in Warranty Deed With Vendor's Lien recorded thereof in 
Volume 10519, Page 1919, Deed Records, Tarrant County, Texas, and amendments thereof, 
including streets, easements and alleyways adjacent thereto, and any riparian rights.